Abstract : We analyze licensing contracts between informed innovators and developers exerting profit-increasing effort. Those contracts must simultaneously induce innovators to convey information on the value of their ideas, while inducing developers to exert effort and protecting the innovators' intellectual property rights. We show that the best innovators signal themselves by taking more royalties even if it reduces the developers' share of returns and their incentives. Moreover, royalties are more likely to be used when property rights are easy to enforce and pre-contractual evidence on innovation quality is hard to produce.
https://hal-pjse.archives-ouvertes.fr/halshs-00754443
Contributor : Caroline Bauer
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Submitted on : Tuesday, November 20, 2012 - 9:40:17 AM
Last modification on : Saturday, April 20, 2019 - 12:32:02 PM
David Martimort, Jean-Christophe Poudou, Wilfried Sand-Zantman. Contracting for an Innovation under Bilateral Asymmetric Information. Journal of Industrial Economics, Wiley, 2010, 58, pp.324-348. ⟨10.1111/j.1467-6451.2010.00421.x⟩. ⟨halshs-00754443⟩
